The Real Problem with the Independent Payment Advisory Board

When I was a graduate student, abandoned houses were a real problem in my community. These eyesores blighted the neighborhood. In many cases, the city needed to quickly condemn these properties to address public safety concerns. Aldermen loudly complained about the cumbersome administrative process which produced a long waiting list of abandoned properties.

I asked an expert why we couldn't fix this, and let the Mayor follow a fairer and more efficient process. "The aldermen would never allow that," he responded. They needed a decentralized, opaque, and inefficient process, which allowed them to perform visible constituency services, moving particular properties up the waiting list. It didn't hurt that the most powerful aldermen could provide the most valued services, too. To allow someone else--the Mayor, yet--to address these problems through an explicit, centralized process was a nonstarter.

I remembered that story when I read Paul Krugman's nice op-ed yesterday. In defending the proposed Independent Payment Advisory Board (IPAB), Krugman offers sound arguments about why Medicare must make evidence-informed decisions about whether to reimburse a new medical device, drug, or procedure. A panel of acknowledged experts, confirmed by Congress yet somewhat insulated from short-term political pressure, can be quite helpful in addressing these problems. As Krugman notes, it's depressingly easy to demagogue the IPAB issue and thus to mobilize a frightened mob worried about death panels.

As you might gather from my introduction, though, I believe the real political problem resides on Capital Hill, not with a frightened or ignorant public. IPAB attracts bipartisan opposition because it might constrain the ability of Senator X or House Chairman Y to quietly help that local wheelchair manufacturer or academic medical center, to make sure that this national association of orthopedic surgeons or home care providers has proper cover in the legislative process.

There's nothing evil about constituency service or interest-group politics. Both have honored roles in American democracy. As in the case of military base closings, however, we must constrain our parochialism to protect our collective capacity to solve hard problems.

As a nation, we must make more disciplined and rigorous decisions to improve both the economy and the quality of Medicare services. Yet as a collection of diverse constituencies and interest groups, we face powerful incentives to favor our individual interests a bit more than we really should from the national perspective.

In short, we face a massive collective action problem. Every Democratic and Republican policy expert knows that we must reduce congressional micromanagement of Medicare policy. Unfortunately, every Democratic and Republican legislator knows that mechanisms such as IPAB that might do so would thereby constrain their own individual prerogatives.

On issue after issue—cloture, anonymous holds, and now on IPAB—many senators and representatives prefer a fragmented, disorganized, and ineffective process to a more centralized approach that would work better for the nation but might reduce their own individual leverage to influence public policies to help favored constituents.

Politicians respond to the incentives created by our political marketplace. The result does not produce a well-functioning democracy. Despite many reasons for caution—the words George W Bush foremost among them—I'm becoming more of a believer in an imperial presidency in domestic policy. Congress seems too screwed up and fragmented to address our most pressing problems.